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					OFFICE   OF THE   NEW YORK STATE COMPTROLLER
                  D IVISION OF LOCAL GOVERNMENT
                      & SCHOOL ACCOUNTABILITY




   Byron-Bergen
Central School District
   Internal Controls Over
     Cash Receipts and
       Disbursements
           Report of Examination
                   Period Covered:
          July 1, 2006 — November 30, 2007
                      2008M-42




               Thomas P. DiNapoli
                                Table of Contents



                                                                                Page

AUTHORITY LETTER                                                                 3


INTRODUCTION                                                                     5
           Background                                                            5
           Objective                                                             5
           Scope and Methodology                                                 5
           Comments of District Officials and Corrective Action                   5


CASH RECEIPTS AND DISBURSEMENTS                                                  7
            Recommendations                                                      8


APPENDIX    A   Response From District Officials                                  9
APPENDIX    B   Audit Methodology and Standards                                 12
APPENDIX    C   How to Obtain Additional Copies of the Report                   13
APPENDIX    D   Local Regional Office Listing                                    14




                       DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY          1
                                                                                       1
                                              State of New York
                                 Office of the State Comptroller

Division of Local Government
and School Accountability

May 2008

Dear School District Officials:

A top priority of the Office of the State Comptroller is to help school district officials manage their
districts efficiently and effectively and, by so doing, provide accountability for tax dollars spent to
support district operations. The Comptroller oversees the fiscal affairs of districts statewide, as well
as districts’ compliance with relevant statutes and observance of good business practices. This fiscal
oversight is accomplished, in part, through our audits, which identify opportunities for improving
district operations and Board of Education governance. Audits also can identify strategies to reduce
district costs and to strengthen controls intended to safeguard district assets.

Following is a report of our audit of the Byron-Bergen Central School District, entitled Internal
Controls Over Cash Receipts and Disbursements. This audit was conducted pursuant to Article V,
Section 1 of the State Constitution, and the State Comptroller’s authority as set forth in Article 3 of the
General Municipal Law.

This audit’s results and recommendations are resources for district officials to use in effectively
managing operations and in meeting the expectations of their constituents. If you have questions about
this report, please feel free to contact the local regional office for your county, as listed at the end of
this report.

Respectfully submitted,


Office of the State Comptroller
Division of Local Government
and School Accountability




                           DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                     3
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                                       Introduction
Background                     The Byron-Bergen Central School District (District) is located in the
                               Towns of Batavia, Bergen, Byron, Elba, Leroy and Stafford in Genesee
                               County, the Town of Clarendon in Orleans County, and the Towns of
                               Riga and Sweden in Monroe County. The District is governed by the
                               Board of Education (Board) which comprises seven elected members.
                               The Board is responsible for the general management and control of
                               the District’s financial and educational affairs. The Superintendent of
                               Schools (Superintendent) is the chief executive officer of the District
                               and is responsible, along with other administrative staff, for the day-
                               to-day management of the District under the direction of the Board.

                               There are two schools in operation within the District, with
                               approximately 1,200 students and 225 employees. The District’s
                               operating expenditures; net of debt service, for the 2006-07 fiscal
                               year were approximately $15.4 million. District expenditures were
                               funded primarily with State aid, real property taxes, and grants.

Objective                      The objective of our audit was to evaluate internal controls over
                               the District’s financial operations to ensure that District assets were
                               properly safeguarded. Our audit addressed the following related
                               question:

                                   •   Are internal controls over cash receipts and disbursements
                                       appropriately designed and operating effectively to adequately
                                       safeguard District assets?

Scope and                      During this audit we examined internal controls of the Byron-Bergen
Methodology                    Central School District for the period of July 1, 2006 to November
                               30, 2007.

                               We conducted our audit in accordance with generally accepted
                               government auditing standards (GAGAS). More information on such
                               standards and the methodology used in performing this audit are
                               included in Appendix B of this report.

Comments of District           The results of our audit and recommendations have been discussed
Officials and Corrective        with District officials and their comments, which appear in Appendix
Action                         A, have been considered in preparing this report. District officials
                               generally agreed with our recommendations and indicated they
                               planned to initiate corrective action.

                               The Board has the responsibility to initiate corrective action. Pursuant
                               to Section 35 of the General Municipal Law, Section 2116-a (3)(c)

                          DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                  5
                                                                                                  5
                    of the Education Law and Section 170.12 of the Regulations of the
                    Commissioner of Education, the Board must approve a corrective
                    action plan that addresses the findings in this report, forward the
                    plan to our office within 90 days, forward a copy of the plan to the
                    Commissioner of Education, and make the plan available for public
                    review in the District Clerk’s office. For guidance in preparing the
                    plan of action, the Board should refer to applicable sections in the
                    publication issued by the Office of the State Comptroller entitled
                    Local Government Management Guide.




6   OFFICE OF THE NEW YORK STATE COMPTROLLER
Cash Receipts and Disbursements

      Cash receipts and disbursement policies must contain specific guidance
      and information for District employees responsible for handling and
      accounting for cash assets. Effective policies adequately address
      the collection, recording and deposit of cash; the disbursement of
      District moneys by check; and prescribed procedures for executing
      wire transfers. Further, duties must be appropriately segregated so
      that someone, other than the person receiving and recording cash
      receipts and making disbursements, is responsible for reconciling
      bank accounts or preparing and making bank deposits. When it is not
      practical to segregate duties because of limited staff resources, the
      Board must establish compensating controls. An adequate system of
      internal controls provides for the timely identification of errors and/or
      irregularities which may have occurred so that corrective action can
      be taken. Once established, the Board has the responsibility to ensure
      that these controls are routinely monitored to determine whether they
      are operating properly.

      Internal controls over cash receipts and disbursements were not
      appropriately designed or operating effectively. The Board has
      not adopted written policies for cash receipts and disbursements,
      segregated critical duties so that no individual controls all phases of a
      transaction, or properly safeguarded District assets.

      The District Clerk receives money from various sources, including
      extra classroom activities. She also opens the mail and endorses any
      checks received. However, she does not provide a receipt to document
      any of the money received. The Clerk places the money in a cabinet
      that remains unlocked during the day. Cafeteria staff have access to
      this cabinet and place money from food sales in it, as District officials
      believe this location is more secure than leaving the cash in the
      cafeteria. However, since more than one person has access to the cash
      in this cabinet, this money is still vulnerable to misappropriation.

      The Clerk subsequently returns the cafeteria money to the cafeteria
      manager for deposit and gives other moneys received to the School
      Business Official (SBO), who prepares a deposit ticket. The SBO
      also maintains the general ledger, is responsible for performing
      wire transfers, and prepares monthly bank reconciliations. The
      concentration of all these activities with the SBO creates an internal
      control weakness.

      The Board hired a Treasurer, effective October 1, 2006, but the
      Treasurer does not perform all of the functions assigned to that office

 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                   7
                                                                          7
                         by Board policy, such as signing checks. The Superintendent, whose
                         signature is affixed to District checks, does not have control over
                         his signature as the image is embedded in the accounting software
                         system and prints automatically when checks are prepared. Checks
                         are routinely prepared by the Clerk prior to the audit of claims.

                         Due to the control deficiencies noted, we tested cash receipts and
                         disbursements. Our testing included two months of wire transfers
                         and cash receipts, as well as 20 cash disbursements, out of a total of
                         approximately 400 cash disbursements for the two months tested. All
                         were transfers, cash receipts and cash disbursements that we tested
                         were properly recorded. We also compared bank statement balances,
                         as adjusted for deposits in transit and outstanding checks, with general
                         ledger cash balances. No exceptions were noted.

Recommendations          1. The Board should adopt written policies for cash receipts and
                            disbursements.

                         2. The Board should segregate duties currently performed by the
                            School Business Official so that one individual does not control
                            key phases of a transaction. Minimally, the duties of cash collection
                            and recordkeeping should be separated.

                         3. The District Clerk should issue a receipt, in duplicate, for all
                            money received and money in her custody should be properly
                            secured prior to deposit.

                         4. District checks should be signed by the Treasurer in accordance
                            with Board policy.

                         5. Signature images should be properly secured and affixed to checks
                            only after audit and approval of claims by the claims auditor and
                            under the control of the appropriate signatory.




  8      OFFICE OF THE NEW YORK STATE COMPTROLLER
                                          APPENDIX A

                      RESPONSE FROM DISTRICT OFFICIALS

The District officials’ response to this audit can be found on the following pages.




                          DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY     9
                                                                                     9
10   OFFICE OF THE NEW YORK STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY   11
                                                         11
                                           APPENDIX B

                     AUDIT METHODOLOGY AND STANDARDS

Our overall goal was to assess the adequacy of the internal controls put in place by officials to safeguard
District assets. To accomplish this, we performed an initial assessment of the internal controls so
that we could design our audit to focus on those areas most at risk. Our initial assessment included
evaluations of the following areas: financial oversight, cash receipts and disbursements, purchasing,
payroll and personal services, and information technology.

During the initial assessment, we interviewed appropriate District officials, performed limited tests
of transactions and reviewed pertinent documents, such as District policies and procedures manuals,
Board minutes, and financial records and reports. In addition, we obtained information directly from
the computerized financial databases and then analyzed it electronically using computer-assisted
techniques. This approach provided us with additional information about the District’s financial
transactions as recorded in its databases. Further, we reviewed the District’s internal controls and
procedures over the computerized financial databases to help ensure that the information produced by
such systems was reliable.

After reviewing the information gathered during our initial assessment, we determined where
weaknesses existed, and evaluated those weaknesses for the risk of potential fraud, theft and/or
professional misconduct. Based on that evaluation we determined that controls appeared to be adequate
and limited risk existed in most of the financial areas we reviewed. We then decided upon the reported
objectives and scope by selecting for audit those areas most at risk. We selected cash receipts and
disbursements for further audit testing.

For cash receipts and disbursements, we conducted interviews with District officials to gain an
understanding of the nature of internal controls and reviewed the Board-adopted job duties for the
Treasurer. We obtained bank statements, deposit tickets, cash receipts and disbursements records,
general ledgers, treasurer reports and related business office and cafeteria records. We tested general
cash receipts by tracing bank statement activity to source documents, such as duplicate receipts, and
to a summary of cash receipts prepared by the Business Official. We compared 20 daily cash sheets
prepared by cafeteria staff to the bank deposit ticket and bank statement and tested 20 wire transfers
from bank statements to the accounting records. For cash disbursements, we compared payroll amounts
listed on the direct deposit register certified by the Superintendent to the actual disbursements in the
District’s bank accounts. We also compared 20 check disbursements to the corresponding warrants
and claims.

We conducted our performance audit in accordance with generally accepted government auditing
standards (GAGAS). Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.




  12         OFFICE OF THE NEW YORK STATE COMPTROLLER
                                           APPENDIX C

           HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT


To obtain copies of this report, write or visit our web page:




                                    Office of the State Comptroller
                                    Public Information Office
                                    110 State Street, 15th Floor
                                    Albany, New York 12236
                                    (518) 474-4015
                                    http://www.osc.state.ny.us/localgov/




                           DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY   13
                                                                                    13
                                                    APPENDIX D
                             OFFICE OF THE STATE COMPTROLLER
                              DIVISION OF LOCAL GOVERNMENT
                               AND SCHOOL ACCOUNTABILITY
                                            Steven J. Hancox, Deputy Comptroller
                                            John C. Traylor, Assistant Comptroller

                                      LOCAL REGIONAL OFFICE LISTING
BUFFALO REGIONAL OFFICE                                      GLENS FALLS REGIONAL OFFICE
Robert Meller, Chief Examiner                                Karl Smoczynski, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
295 Main Street, Room 1050                                   One Broad Street Plaza
Buffalo, New York 14203-2510                                 Glens Falls, New York 12801-4396
(716) 847-3647 Fax (716) 847-3643                            (518) 793-0057 Fax (518) 793-5797
Email: Muni-Buffalo@osc.state.ny.us                          Email: Muni-GlensFalls@osc.state.ny.us

Serving: Allegany, Cattaraugus, Chautauqua, Erie,            Serving: Clinton, Essex, Franklin, Fulton, Hamilton,
Genesee, Niagara, Orleans, Wyoming counties                  Montgomery, Rensselaer, Saratoga, Warren, Washington
                                                             counties

ROCHESTER REGIONAL OFFICE                                    ALBANY REGIONAL OFFICE
Edward V. Grant, Jr., Chief Examiner                         Kenneth Madej, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
The Powers Building                                          22 Computer Drive West
16 West Main Street – Suite 522                              Albany, New York 12205-1695
Rochester, New York 14614-1608                               (518) 438-0093 Fax (518) 438-0367
(585) 454-2460 Fax (585) 454-3545                            Email: Muni-Albany@osc.state.ny.us
Email: Muni-Rochester@osc.state.ny.us
                                                             Serving: Albany, Columbia, Dutchess, Greene,
Serving: Cayuga, Chemung, Livingston, Monroe,                Schenectady, Ulster counties
Ontario, Schuyler, Seneca, Steuben, Wayne, Yates
counties

SYRACUSE REGIONAL OFFICE                                     HAUPPAUGE REGIONAL OFFICE
Eugene A. Camp, Chief Examiner                               Jeffrey P. Leonard, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
State Office Building, Room 409                               NYS Office Building, Room 3A10
333 E. Washington Street                                     Veterans Memorial Highway
Syracuse, New York 13202-1428                                Hauppauge, New York 11788-5533
(315) 428-4192 Fax (315) 426-2119                            (631) 952-6534 Fax (631) 952-6530
Email: Muni-Syracuse@osc.state.ny.us                         Email: Muni-Hauppauge@osc.state.ny.us

Serving: Herkimer, Jefferson, Lewis, Madison,                Serving: Nassau, Suffolk counties
Oneida, Onondaga, Oswego, St. Lawrence counties

BINGHAMTON REGIONAL OFFICE
Patrick Carbone, Chief Examiner                              NEWBURGH REGIONAL OFFICE
Office of the State Comptroller                               Christopher Ellis, Chief Examiner
State Office Building, Room 1702                              Office of the State Comptroller
44 Hawley Street                                             33 Airport Center Drive, Suite 103
Binghamton, New York 13901-4417                              New Windsor, New York 12553-4725
(607) 721-8306 Fax (607) 721-8313                            (845) 567-0858 Fax (845) 567-0080
Email: Muni-Binghamton@osc.state.ny.us                       Email: Muni-Newburgh@osc.state.ny.us

Serving: Broome, Chenango, Cortland, Delaware,               Serving: Orange, Putnam, Rockland, Westchester
Otsego, Schoharie, Sullivan, Tioga, Tompkins                 counties
counties



  14            OFFICE OF THE NEW YORK STATE COMPTROLLER